Efficient Frontier Forecast

This tool uses mean-variance optimization to generate forward-looking efficient frontiers based on user-specified expected annual return and volatility of assets combined with historical asset correlations.

The required inputs for the efficient frontier include the portfolio assets and expected annual returns, along with volatility expectations when historical volatility is not used. You can optionally specify the asset allocation and allocation constraints for the portfolio assets. If an asset allocation is specified, the provided portfolio will be rendered on the efficient frontier chart.

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Efficient Frontier Results

Portfolio Allocations

Provided Portfolio
Asset Class Allocation
Global Bonds (Unhedged) 50.00%
Global ex-US Stock Market 50.00%
Save portfolio »
Tangency Portfolio
Asset Class Allocation
Global Bonds (Unhedged) 64.65%
Global ex-US Stock Market 35.35%
Save portfolio »

Portfolio Returns

Portfolio Statistics
PortfolioExpected ReturnExpected VolatilitySharpe Ratio
Provided Portfolio4.73%10.24%0.45
Tangency Portfolio4.07%8.70%0.45
Efficient Frontier Assets
#AssetExpected ReturnStandard DeviationSharpe RatioMin. WeightMax. Weight
1Global Bonds (Unhedged)2.50%6.77%0.3570.00%100.00%
2Global ex-US Stock Market7.00%16.70%0.4030.00%100.00%
Results based on the provided capital market expectations. Expected return is the annualized monthly arithmetic mean return. Ex-ante Sharpe Ratio calculated using the current 3-month treasury bill return as the risk-free rate.

Asset Correlations

Asset Correlations
AssetGlobal Bonds (Unhedged)Global ex-US Stock Market
Global Bonds (Unhedged)1.000.42
Global ex-US Stock Market0.421.00
Based on monthly returns from Jan 1994 to Jul 2021
Efficient Frontier Points
#Global Bonds (Unhedged)Global ex-US Stock MarketExpected Return*Standard Deviation*Sharpe Ratio*
1100.00%0.00%2.50%6.77%0.357
298.99%1.01%2.54%6.78%0.364
397.98%2.02%2.59%6.79%0.370
496.97%3.03%2.63%6.80%0.376
595.96%4.04%2.68%6.81%0.381
694.95%5.05%2.72%6.83%0.387
793.94%6.06%2.77%6.85%0.392
892.93%7.07%2.81%6.87%0.397
991.92%8.08%2.86%6.90%0.401
1090.91%9.09%2.90%6.93%0.406
1189.90%10.10%2.95%6.97%0.410
1288.89%11.11%2.99%7.00%0.414
1387.88%12.12%3.04%7.04%0.418
1486.87%13.13%3.08%7.09%0.422
1585.86%14.14%3.13%7.13%0.425
1684.85%15.15%3.17%7.18%0.428
1783.84%16.16%3.22%7.24%0.431
1882.83%17.17%3.26%7.29%0.434
1981.82%18.18%3.31%7.35%0.436
2080.81%19.19%3.35%7.41%0.438
2179.80%20.20%3.39%7.47%0.441
2278.79%21.21%3.44%7.54%0.443
2377.78%22.22%3.48%7.61%0.444
2476.77%23.23%3.53%7.68%0.446
2575.76%24.24%3.57%7.75%0.447
2674.75%25.25%3.62%7.83%0.448
2773.74%26.26%3.66%7.91%0.450
2872.73%27.27%3.71%7.99%0.450
2971.72%28.28%3.75%8.07%0.451
3070.71%29.29%3.80%8.15%0.452
3169.70%30.30%3.84%8.24%0.453
3268.69%31.31%3.89%8.33%0.453
3367.68%32.32%3.94%8.42%0.453
3466.67%33.33%3.98%8.51%0.454
3565.66%34.34%4.03%8.60%0.454
3664.65%35.35%4.07%8.70%0.454
3763.64%36.36%4.12%8.80%0.454
3862.63%37.37%4.16%8.89%0.454
3961.62%38.38%4.21%8.99%0.453
4060.61%39.39%4.25%9.10%0.453
4159.60%40.40%4.30%9.20%0.453
4258.59%41.41%4.34%9.30%0.452
4357.58%42.42%4.39%9.41%0.452
4456.57%43.43%4.43%9.52%0.451
4555.56%44.44%4.48%9.62%0.451
4654.55%45.45%4.52%9.73%0.450
4753.54%46.46%4.57%9.85%0.450
4852.53%47.47%4.61%9.96%0.449
4951.52%48.48%4.66%10.07%0.448
5050.51%49.49%4.71%10.18%0.447
5149.49%50.51%4.75%10.30%0.447
5248.48%51.52%4.80%10.41%0.446
5347.47%52.53%4.84%10.53%0.445
5446.46%53.54%4.89%10.65%0.444
5545.45%54.55%4.93%10.77%0.443
5644.44%55.56%4.98%10.89%0.443
5743.43%56.57%5.02%11.01%0.442
5842.42%57.58%5.07%11.13%0.441
5941.41%58.59%5.11%11.25%0.440
6040.40%59.60%5.16%11.37%0.439
6139.39%60.61%5.21%11.50%0.438
6238.38%61.62%5.25%11.62%0.437
6337.37%62.63%5.30%11.75%0.436
6436.36%63.64%5.34%11.87%0.435
6535.35%64.65%5.39%12.00%0.434
6634.34%65.66%5.43%12.13%0.433
6733.33%66.67%5.48%12.25%0.432
6832.32%67.68%5.53%12.38%0.431
6931.31%68.69%5.57%12.51%0.430
7030.30%69.70%5.62%12.64%0.429
7129.29%70.71%5.66%12.77%0.429
7228.28%71.72%5.71%12.90%0.428
7327.27%72.73%5.76%13.03%0.427
7426.26%73.74%5.80%13.16%0.426
7525.25%74.75%5.85%13.29%0.425
7624.24%75.76%5.89%13.42%0.424
7723.23%76.77%5.94%13.56%0.423
7822.22%77.78%5.98%13.69%0.422
7921.21%78.79%6.03%13.82%0.421
8020.20%79.80%6.08%13.96%0.420
8119.19%80.81%6.12%14.09%0.419
8218.18%81.82%6.17%14.23%0.418
8317.17%82.83%6.21%14.36%0.417
8416.16%83.84%6.26%14.50%0.417
8515.15%84.85%6.31%14.63%0.416
8614.14%85.86%6.35%14.77%0.415
8713.13%86.87%6.40%14.90%0.414
8812.12%87.88%6.45%15.04%0.413
8911.11%88.89%6.49%15.18%0.412
9010.10%89.90%6.54%15.32%0.411
919.09%90.91%6.58%15.45%0.410
928.08%91.92%6.63%15.59%0.410
937.07%92.93%6.68%15.73%0.409
946.06%93.94%6.72%15.87%0.408
955.05%94.95%6.77%16.01%0.407
964.04%95.96%6.81%16.15%0.406
973.03%96.97%6.86%16.28%0.406
982.02%97.98%6.91%16.42%0.405
991.01%98.99%6.95%16.56%0.404
1000.00%100.00%7.00%16.70%0.403
*Ex-ante values shown for portfolio return and volatility. Ex-ante Sharpe Ratio calculated using the current 3-month treasury bill return as the risk-free rate.
Notes on results:
  • Past performance is no guarantee of future results, which may vary. All use is subject to terms of service.
  • Investing involves risk, including possible loss of principal. The value of the investments and the income derived from them may fluctuate over time.
  • All portfolio returns presented are hypothetical and backtested. Hypothetical returns do not reflect trading costs, transaction fees, or taxes.
  • Portfolio optimization determines target weights for portfolio assets based on mathematical models that can use either historical or forecasted data as inputs. Optimization results are not guarantees of future performance.
  • The results are based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete.
  • The results do not constitute investment advice or recommendation, are provided solely for informational purposes, and are not an offer to buy or sell any securities.
  • The results are based on the total return of assets and assume that all received dividends and distributions are reinvested.
  • Historical asset statistics are based on monthly returns from Jan 1994 to Jul 2021
  • The efficient frontier is based on the monthly returns, volatilities, and correlations of the specified assets
  • The displayed standard deviation and expected return in the efficient frontier are annualized from the monthly returns
  • Ex-ante Sharpe Ratio for the efficient frontier forecast is calculated using the current 3-month treasury bill return as the risk free rate (0.05% annualized)